Friendly Data Embolden Spirits; Dow Rallying at Midday - TheStreet

Friendly Data Embolden Spirits; Dow Rallying at Midday

Fear? What fear? Major indices higher at midday as CPI comes as expected.
Publish date:

Fear? Capitulation? Thanks to a benign

Consumer Producer Index

, you won't be finding much of that in the stock market today.


Labor Department

released figures showing the headline CPI gaining 0.4% overall in September, equaling the consensus estimate in the


poll and up from the 0.3% clip in August. The core rate, which excludes food and soaring energy prices, increased 0.3%, also in line with expectations and higher than the month-ago 0.1% gain.

The market was ready for a much higher number, given the 1.1% jump in Friday's

Producer Price Index

, much of which was due to a large increase in tobacco prices. Excluding tobacco, the CPI would have risen 0.3%, the Labor Department said.

"Even though it's not assuredly a good number, people are happy relative to Friday's sticker-shock PPI," said Peter Boockvar, equity strategist at

Miller Tabak

. "And that's moving people who were on the sidelines to come in and buy stocks."

To wit, all the major proxies were solidly higher at midsession. The

Dow Jones Industrial Average

was up 142 to 10,258, while the

S&P 500

was running up 16.9 to 1271. The

Nasdaq Composite Index

was 26 higher to 2715, despite spotty performance among its largest stocks.

Net shares were looking solid. Internet Sector Index

was climbing 5, or 3%, to 175 7/16, led by strong upside moves by





(BVSN) - Get Report



(RNWK) - Get Report


With breadth looking up on both major exchanges, the small-cap

Russell 2000

was up 5 to 414.

Has everyone forgotten all the talk about the market's increasingly tenuous support levels and the need for capitulation? Apparently so. The market's fear gauge, the

Chicago Board Options Exchange's Volatility Index

, or VIX, was lately down 2.64, or 9.0%, to 26.80.

Beyond the very short term, the complacency suggested by the VIX could prove painful for investors, Boockvar thinks. "I think investors have to be careful not to get fooled by these kinds of rallies," he said. "We've seen over the last month that these rallies will get sold."

Case in point: Sam Ginzburg, managing director of equity trading at


, basking in the warm, green glow of the BKX on his trading screen toward midday.

"We took a shot and were long into the number because we liked the way the banks looked toward the end of the day

yesterday," Ginzburg said. "We booked a profit in them. In this market, if you have some money you need to keep it."

Good for him. The long-suffering

Philadelphia Stock Exchange/KBW Bank Index

was one of the market's strongest segments, up about 4.3%.

"It's not telling me to dip my toe back into the water and get long," Ginzburg said of today's action. "It's more of a maintenance time. I'm just kind of settling into the midday reprieve."

There's no telling how long "maintenance time" will last. For one thing,



Alan Greenspan

, whose comments have roiled a market or two in the past, is currently speaking at an Atlanta Fed conference on financial risk. But more importantly, the market's ambivalence toward this quarter's blowout earnings suggests that stocks' ability to rebuild after their recent declines hinges mainly on the direction of inflation and interest rates. The

Federal Open Market Committee

meets next on November 16, and there's still a lot of data between now and then.

Boockvar remains cautious: "I still think we're in a downward trend. Even though the CPI was in line, it's not a particularly good number -- 0.4% in the headline is still above trend. We're not out of the woods yet. Inflation seems to be ticking higher, and that's not going to be good for bonds and, thus, for stocks."

Nonetheless, the brokers were lately running up along with the banks, the

American Stock Exchange Broker/Dealer Index

up about 3%. Elsewhere, the

American Stock Exchange Pharmaceutical

Index was up about 4.3%, and the

Dow Jones Transportation Average

was up 1.6%.

Most notable on the downside were the boxmakers, which were getting crushed in the fallout from


(DELL) - Get Report

profit warning.

wrote about the industry implications of Dell's chip-pricing problems in

a story last night, and first predicted in an

Oct. 6 story that a Taiwan supply crunch might hurt Dell's results.

After initially reacting cautiously to the CPI, the 30-year Treasury was lately up 12/32 to 97 23/32, putting the yield at 6.28%. The December bond futures were up 11 to 111 27/32. "If

the futures can get over 112," said Ginzburg, "that would be very good for the market, very good."

(For more on the fixed-income market, see today's early

Bond Focus.)

Market Internals

Breadth was decidedly positive.

New York Stock Exchange:

1,795 advancers, 1,038 decliners, 506 million shares. 13 new 52-week highs, 161 new lows.

Nasdaq Stock Market:

2,192 advancers, 1,359 decliners, 601 million shares. 40 new highs, 72 new lows.

Tuesday's Midday Watchlist

By Eileen Kinsella
Staff Reporter



was soaring 20 5/8, or 47.6%, to 64 after last night's announcement by

Nortel Networks


that it plans to buy the e-business software maker in a stock transaction valued at $2.1 billion. Shares of Nortel were falling 1 to 51 3/8.

Mergers, acquisitions and joint ventures



rose 1 1/2 to 33 13/16 after saying it closed a deal with


(LOR) - Get Report

lately up 5/16 to 16 7/8, for Latin American satellite access.

Republic New York


lost 1/2 to 61 7/16 after it said its shareholder vote on its $10.3 billion proposed merger with Britain-based

HSBC Holdings

has been postponed for the third time due to an ongoing investigation of Republic's futures brokerage division. Republic said it would push the meeting back to Nov. 30 from Oct. 29, in order to complete a probe into the bank's relations with a New Jersey money manager Martin Armstrong, who is accused of securities fraud.

Earnings/revenue reports and previews


Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.


Dell dropped 3 1/8, or 7.6%, to 38 3/16 after cautioning last night that a 25% increase in computer memory-chip component prices used in its PCs would probably dent its third-quarter profit margins. CFO Thomas Meredith said that although he sees the price hike as a short-term problem, the company's third-quarter operating margins would be affected. Dell refused to say if stress on profit margins would trigger lower

earnings per share.

Bristol-Myers Squibb

(BMY) - Get Report

gained 4 1/8, or 5.8%, to 75 5/8 after reporting third-quarter earnings of 54 cents a share, in line with the 24-analyst estimate and up from the year-ago 47 cents.

Chiquita Brands


added 3/16 to 5 11/16 after posting a third-quarter loss of 53 cents a share, narrower than the two-analyst estimate of 55 cents but wider than a year-ago loss of 23 cents.

Coca-Cola Enterprises


added 3/8 to 23 1/16 after it posted third-quarter earnings of 24 cents a share, beating the 17-analyst estimate of 21 cents but down from the year-ago 28 cents.

Cypress Semiconductor

(CY) - Get Report

rose 1/16 to 24 3/8 after it posted third-quarter earnings of 24 cents a share, better than the 12-analyst estimate of 21 cents and up from a year-ago 2 cents a share.

Host Marriott


posted third-quarter funds from operations of 35 cents a share, a penny better than the 14-analyst estimate, and up from a year-ago 32 cents.

ITT Industries

(IIN) - Get Report

lifted 1 1/8 to 33 11/16 after posting third-quarter earnings of 60 cents a share, beating the eight-analyst estimate of 58 cents and the year-ago 23 cents.


(IVC) - Get Report

slipped 3/16 to 22 1/2 after it posted third-quarter earnings of 46 cents a share, in line with the five-analyst estimate and up from the year-ago 43 cents.

Johns Manville


fell 3/16 to 11 3/4 after it reported third-quarter earnings of 49 cents a share, missing the three-analyst estimate of 50 cents but up from the year-ago 31 cents a share.

Northwest Airlines


rose 5/8 to 26 3/8 after posting third-quarter earnings of $1.96 a share, missing the 12-analyst estimate of $1.98 but up from the year-ago loss of $2.91.

Parametric Technology


was climbing 3/16 to 15 3/8 after it reported pro forma fourth-quarter earnings of 18 cents a share, beating the 11-analyst estimate of 16 cents and the year-ago 17 cents.

Philip Morris

(MO) - Get Report

Was sinking 1/4 to 30 1/4 after it reported third-quarter underlying earnings of 87 cents a share, in line with the 12-analyst estimate and up from underlying earnings of 84 cents a year ago. The company said underlying results exclude several pretax charges. Including the charges, the company earned 84 cents a share, compared with a year-ago 81 cents.

Summit Bancorp

(SUB) - Get Report

Was popping 1 7/16 to 31 7/16 after it posted third-quarter earnings of 53 cents a share, falling below the 18-analyst estimate of 70 cents and the year-ago 67 cents.

Texas Instruments

(TXN) - Get Report

was falling 2 3/16 to 82 1/4 after it posted third-quarter earnings of 51 cents a share, handily beating the 25-analyst estimate of 43 cents and the year-ago 19 cents, which included a pretax charge of $14 million for depression of fixed assets.

Wells Fargo

(WFC) - Get Report

was climbing 1 3/4 to 41 1/4 posted third-quarter earnings of 57 cents a share, in line with the 27-analyst estimate and up from the year-ago 45 cents.

Offerings and stock actions

Mueller Industries

(MLI) - Get Report

was bouncing 1 to 29 9/16 after it said it set a stock buyback for up to 4 million common shares.

Analyst actions

Merrill Lynch

upgraded shares of



to intermediate-term buy from accumulate, while

Credit Suisse First Boston

upped its rating to buy from hold. Lexmark was jumping 6 1/2, or 10%, to 71 9/16.

J.P. Morgan

upped its rating on

Lattice Semiconductor

(LSCC) - Get Report

to buy from market performer. PaineWebber upped the stock's fiscal 2000 EPS to $1.27 from $1.10. Lattice shares were hopping 2 3/16, or 7.8%, to 31.

Warburg Dillon Read

upped its rating of



to strong buy from buy. Lucent shares were advancing 1 3/4 to 59 1/16.

Warburg Dillon Read rolled out coverage of


(RYN) - Get Report

with a strong buy rating and a price target of 55. Shares of Rayonier were adding 1/4 to 37 7/16.

Banc of America Securities

upped its rating on

Suiza Foods


to buy from market performer. Suiza Foods was gaining 1 to 36 7/16.


General Electric

(GE) - Get Report

was hopping 2 1/8 to 119 3/4 despite its appliances' division announcment that it was recalling roughly 3.1 million




brand dishwashers that could be possible fire hazards. GE, along with the

U.S. Consumer Product Safety Commission

, said that models made between April 1983 and January 1989 contain a slide switch that can melt and ignite over time.


was leaping 1, or 8.5%, to 13 after it said it plans to hike Web-based advertising and email marketing rates.